Arizona Real Estate License Practice Exam 2026 - Free Real Estate Practice Questions and Study Guide

In real estate transactions, the treatment of earnest money on a closing statement reflects its role as a deposit made by the buyer to demonstrate serious intent to purchase the property. The correct understanding is that earnest money is credited to the buyer because it is essentially a prepayment that goes toward the buyer's costs at closing, such as the down payment and closing costs.

When the closing statement is prepared, the earnest money that the buyer has deposited is deducted from the total amount the buyer owes at closing. This means the buyer gets a credit for the earnest money they've put down, reducing their overall financial obligation at the time of closing.

In contrast, the seller does not receive any debit related to the earnest money on the closing statement at that stage, as the deposit is a matter between the buyer and the closing costs. The seller may ultimately benefit from the earnest money if the buyer defaults on the contract, but that is a separate matter from the closing statement's accounting.

This situation clarifies why, on the closing statement, the treatment of the earnest money primarily revolves around crediting the buyer for the amount they have already essentially paid.